When VAT was introduced to Nigeria with the enactment of VAT Act 102 of 1993, replacing the sales tax of Federal Government Decree 7 of 1986; it probably did not envision that Nigerian politicians will scuttle the whole thing and manage to treat it as another revenue sharing exercise.
“Sharing” in Nigeria’s political parle means that the FG shares all income ‘equally” amongst all tiers of government. The metrics vary depending on the specific item, but the FG holds control over some very lucrative assets in what is called the executive list. The logic that gave birth to this peculiar political behaviour was born in two phases. Before independence, Northern Nigeria was not as progressive as the south in terms of socio-economic development and for that reason it first resisted independence, asked for a delay and ensured that population became an important political metric in distributing political and economic assets. After the civil war, military regimes changed Nigeria’s political structure from a federal state with 3 regions to 6 regions then finally to a unitary state with 36 sub-states. This further entrenched the Northern political hegemony over the South, it had more states and more people, and as long as Nigeria “shared equally” they will always dominate. By the time the 1999 constitution came to be the term “Federal Character Principle” was woven into Nigeria’s political fabric more formally, now political positions had to reflect the 36 states. Presidential tickets are not exempt from this formula, the south gets 8 years and the north gets 8. The ticket must also have a North/South and Christian/Muslim candidature. Sharing also affects the internal structure of the states, in this case, the governorship rotates around the local governments or the tribes and the wards they control. The logic is that everything is equitable and no one usurps the other and we are all tied and no one can escape this marriage because we all depend on it for our livelihood and all get our turn to “rule”, well some of us anyway.
It was all going well until BAT fought with OBJ over the creation of local governments in Lagos and OBJ withheld money and then Lagos decided it will raise its own money and depend less on the FG. Around the same time the south-south people fought against the measly 13% derivative the FG saw as appropriate compensation over their oil assets, the war was bloody and the state had to come up with other means to funnel more money to the region. Things got worse when news broke out that Zamfara does not share its gold revenue with the other 35 states. The south became more agitated about the unfair consequences or outcomes of this sharing formula. The more progressive and advanced states bear the brunt of the country’s underdevelopment. The lesser developing states are quite happy to enjoy the free FAAC money but the states that actually generate this income receive far less than they put in.
The current administration made things worse when it chose not to respect the FCP, it consistently has shown it does not even really respect the laws of the country. Thus the southern states have increased their agitation against what they perceive to be an unfair or unjust political set-up. Some quarters are asking for a formal political restructuring of the country to allow more state/regional control and a weaker federal government, some are convinced that a financial (fiscal) restructuring will precede and force a political restructuring.
One thing the FG is careful about controlling is income streams it does not have the ability to capture. The FG can usurp natural resources through laws but it cannot control the minds and ability of people to create business entities that are profitable, it can however try to use any means necessary to usurp part of that profit for itself. For big companies and industries, it uses regulatory compliance as a tool to control the companies and do what the state wants — the finance industry and the telecoms and manufacturers have been at loggerheads with the FG over the years, as it twists and bends rules depending on its needs.
Maybe it’s a consequence of generational shift coupled with the effects of the endsars protest but the newer industries and richer states seem to be fed up with the sharing games of the FG. They are baulking. Wike, the Governor of Rivers State recently went for the jugular by saying why should states who ban alcohol benefit from those making money from selling it? Besides the moral question, an economic question is also revealed, why exactly do states give all VAT to the FG and not just a percentage? Why does the FG need to control all revenue? Why does the FG decide how much states and local governments receive? Why do states have little control over the income they generate?
It is evident that a static revenue sharing formula puts the better developing states at a disadvantage because they do not get what they put in. The responsibility towards equality should be the responsibility of the State governments as they are closer to the people and can therefore be more responsive. It is unsustainable and anti-development that the FG insists on collecting all revenue and then controlling who gets what to fund their development and workforce.
The government receives its legitimacy from the people it governs. The Rivers state won a High Court judgment and then the FIRS issued a directive to disregard the law because it wants to appeal it. The people doing this to the Nigerian institutions surely do not care about the country, they want to share the resources but are they concerned if this impacts the people positively? The CBN can wake up to get a secret injunction against an industry it doesn’t like, the NCC can shut down the use of an app because of criticism but the people shouldn’t listen to the same courts when it says they can’t share a state’s sales tax. How long does the FG think it can continue to disregard rules and laws that created it and expect to be taken seriously? I expect more states just as Lagos has done to pass state VAT laws, come and beat us as the millennials will say.
The question before Nigerians of this generation is whether we will move our trajectory towards one of justice and fairness or not. Nigeria has always shied away from answering the deep philosophical and conceptual questions about itself. As a consequence of its 30-year military rule, it relies instead on a superficial call for unity, where everyone contributes and shares equally. Nigeria is like a socialist but capitalist with a sprinkling of communism type country. Younger Nigerians seem to be searching for a different kind of structure and appear willing and motivated to creatively engineer that for themselves.
